pension savings

Everyone wants a solid pension pot that will guarantee a comfortable retirement. However, achieving this ideal from your pension savings has become somewhat more complicated.

As is widely reported, for anyone wanting to achieve a decent rate of interest, safe, traditional savings accounts and ISAs have become pretty much unviable. It was also recently revealed that 90,000 of the UK’s most affluent savers have stopped putting money into their pension pot to avoid hefty tax charges.

So how can you achieve good returns on pension savings, and what are the risks attached?

For those looking for a quick profit, the liquidity and opportunity for speculation that the stock market offers can be the answer. However, in a current climate of volatility, a high level of risk tolerance is key. When considering something as vital as your pension, it makes sense to examine longer-term, more stable investment options. Which brings me on to property.

Bricks and mortar can provide two key things: reliable returns and a decent level of security. Although property is an illiquid asset, making it a longer-term investment, value doesn’t fall so sharply in a short space of time as with the stock market. Despite initial panic, Brexit also appears to have had little immediate effect on the housing market, as demand continues to outstrip supply.

Buy-to-let has in fact been the best performing investment option in the UK since 1996. However, changes to taxation and legislation are producing a generation of increasingly disenfranchised landlords. This includes changes to laws regarding offsetting interest against rental income, which has made obtaining positive cash flow from an investment with a normal LTV mortgage extremely hard.

Added to this is the sheer hassle of managing a traditional buy-to-let property. Landlords face letting fees, council licensing fees, service charges/ground rents for apartments, tenancy deposit charges, furnishing costs etc. All of this takes up vast amounts of time, whilst simultaneously eating into your gross yield.

This is where alternative investment opportunities, such as property crowdfunding, can be useful.  Investors can make either equity or debt-based investments in property, diversifying their portfolio and spreading capital and risk across a number of investment projects and structures.

This is supported by a hands-free investment style that removes the work involved in managing and maintaining a property. If the right crowdfunding investment is chosen, you can receive a substantial return on your investment as property prices rise. Some platforms offer fixed returns as high as 12% on secured loans. On equity deals, you receive a share of rental yield and capital appreciation, which can vary according to how the asset performs.

Whichever property investment method you choose, location is key. The further north you go, the higher the gross yields – ensuring you achieve a regular income – but the lower the opportunity for strong capital growth. Whilst an important consideration, capital growth is merely speculative, so gross yield should be the primary focus.

Greater Manchester offers a good balance between high yields and potential for capital growth. Yields average around 7% and capital growth prospects are strong, with investment being channelled into the city from a number of areas. The construction of Airport City has also put Manchester on the map for foreign investors.

Of course, as with all investments, property crowdfunding poses risks. It isn’t always ideal if you need a liquid asset, as you may be tied in if you can’t find a buyer for your shares until the property is sold. It’s important to find out as much as possible about the team behind your chosen platform. Look for individuals who have a proven track record in property investment with long-term portfolios of their own.

When it comes to investing pensions savings, a varied investment portfolio is key to achieving strong returns and balancing risk. There’s a reason Andy Haldane controversially touted property as a better bet than a pension, but it takes good advice and a thought-through strategy to ensure your investments work for you.

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